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News on the U.S. employment front was muddled this week, as one key labor metric showed positive developments for the economy, while two others presented a less encouraging picture.

Jobless Claims: Little Change

Initial jobless claims did dip by 4,000 to 444,000 for the week ending May 8, but a Bloomberg News survey had expected a larger decline, to 440,000 -- which puts the initial jobless claims number in the category of a disappointment. Initial claims have declined an impressive 26% compared to a year ago, but they're still at a level that indicates considerable job losses in the economy. The same applies to the four-week moving average, which declined by 9,000 to 450,500.

Jobless claims need to drop below 400,000 during the next two quarters to give economists and investors confidence that commercial activity is increasing at a pace that prompts most companies to curtail lay-offs, and resume hiring.

Continuing Claims Downtrend Pauses

Meanwhile, continuing claims unexpectedly rose 12,000 to 4.627 million for the week ending May 1, and here again, economists hope it's just a momentary lull in hiring growth. Like initial jobless claims, continuing claims have fallen substantially: They've declined about 28% since May 2009 as the economy has strengthened, but the number is still well above what economists consider a normal level of between 2.75 million and 3 million.

It's highly unlikely that continuing claims will drop below 3 million in 2010. What economists hope to see is a steady decline in continuing claims averaging about 100,000 per month. That would push the continuing claims stat down below 4 million by December's end, and would be indicative of both a strengthening economy and sustained growth in hiring.

State-Level Claims: More Progress

At the state level, this week's report revealed more progress. There were no large increases in state-level claims, and there was one large decrease. For the week ending May 1, even the largest increases were small: New York reported a rise of 4,021 and Kentucky a rise of 1,015. Meanwhile, California reported an 18,546-claim drop, while Massachusetts and Indiana posted declines of 3,628 and 3,242 respectively.

The absence of large increases and the prevalence of large declines at the state level is an encouraging sign for the labor market because historically, large weekly declines will surface and become more-widespread among the states as job creation starts to gain traction in an economic recovery.